There are new variables in the merger talks between Honda and Nissan.

According to Bloomberg, Honda hopes that Nissan can sort out its relationship with Renault before the two sides reach a merger, and even proposed that Nissan buy out the remaining Nissan shares held by Renault.

It can be said that Honda has put forward new requirements in addition to profitability in its merger negotiations with Nissan.

Nissan Motor Co. CEO Makoto Uchida (left) and Honda Motor Co. CEO Toshihiro Mibe shake hands at a joint press conference in Tokyo, Japan, August 1, 2024, local time.

The alliance between Nissan and Renault dates back to 1999.

At that time, the French automaker bought a 36.3% stake in Nissan to save the bankrupt company. By 2023, Renault held a 43% stake in Nissan. Currently, the stake has been reduced to 35.7%. To this day, Renault remains Nissan's largest shareholder.

Previously, Hon Hai Technology Group, the parent company of Foxconn, which is famous for producing Apple phones, was exposed to have targeted Nissan Motor shares deposited in a trust bank by French Renault, and tried to use this as a means to obtain the operating rights of Nissan Motor. Foxconn and Taiwanese automaker Yulon Group jointly created a new electric car brand, Foxtron, in 2020, which is famous for "touching Tesla". According to the Wall Street Journal, the acquisition of Nissan Motor will overcome Foxconn's limitations in car design and production.

Foxconn's opportunistic move directly accelerated the merger process between Honda and Nissan.

In March 2024, Honda and Nissan officially announced that the two sides would cooperate in the development of electric vehicles and share costs through joint development. In August of the same year, when asked whether there were any capital alliance negotiations between Honda and Nissan, Honda President Toshihiro Mibe said that he did not deny the possibility, but the two sides had not yet discussed the capital alliance. On December 23 of that year, Honda and Nissan stated at a press conference that the two sides intended to merge into a holding company by August 2026 to enhance the competitiveness of the electrification transformation.

Perhaps it is not Honda and Nissan that are more anxious, but the Japanese government. Behind the merger of Honda and Nissan is the promotion of the Ministry of Economy, Trade and Industry of Japan. There are many people who hold this view on the merger of the two parties. The Japanese government does not want Nissan to fall into the hands of a Taiwanese company. Just as seven years ago, the Japanese government could not accept Nissan falling into the hands of a French company. If you are familiar with the name Carlos Ghosn, do you still remember the sensational news in 2018 that "Former Nissan CEO Ghosn was arrested suddenly after landing at Tokyo Haneda Airport". In 2018, as the chairman of the Renault-Nissan-Mitsubishi Alliance, Ghosn was at the peak of his power because the alliance was the world's largest automotive group at the time. Ghosn believed that the accusation of his financial impropriety was to prevent Nissan from a more comprehensive integration with Renault, which was the plan he was formulating at the time and the condition for Renault to renew his contract with him at the time. Ghosn could have refused Renault's proposal and retired gracefully.

In recent years, integration has become one of the major trends in the development of the automotive industry. The large amount of funds required to improve fuel economy and develop new technologies such as electrification and intelligence all require scale to achieve certain economic benefits. This is a principle that everyone understands, but whether it can be truly realized is another matter.

As the second largest automaker in Japan, Honda has always believed that it does not have an advantage in scale and cannot really compete with Toyota, especially after the failure of its cooperation with GM. Honda really needs a partner. However, Honda's competitors are not only Toyota, but also electric vehicle companies from China.

However, when Mibe was asked, "Why would Nissan be a good business partner for Honda, a mid-sized automaker?" his response was, "That's a tricky question."

Since Ghosn was arrested for financial misconduct in 2018, Nissan has been in a desperate state, and now it is on the verge of bankruptcy again. According to Nissan's previously released financial data, as of the first half of fiscal 2024, Nissan's sales fell 1.3% year-on-year, net profit plummeted 93.5%, and a loss of 9.3 billion yen was recorded in the second fiscal quarter. According to a previous report by the Financial Times, an unnamed Nissan executive said, "Nissan still has 12 or 14 months to survive."

“Nissan must prove to Honda that it is worthy of being acquired,” Toshihiro Mibe said at a news conference in December, adding that “Nissan’s rationalization measures are an absolute condition (for a merger).”

On January 17, 2025, Kyodo News revealed details of Nissan's previously undisclosed layoffs. "According to interviews with relevant sources, the 9,000 global layoffs promoted by Nissan Motor also include domestic employees in Japan. In addition, they also learned that the current 63-member board of directors will also be reduced in April. Considering the effort to sign a management merger agreement with Honda in June, Nissan will completely achieve organizational slimming, and this move is also intended to eliminate Honda's doubts about Nissan's revival of operations."

As for whether Nissan has the strength to acquire Renault's shares? People are skeptical. Renault currently owns 35.7% of Nissan's shares, worth about $3.6 billion. As of the end of 2024, Nissan's cash and cash equivalents are about 1.52 trillion yen (about $9.7 billion), which means that it will need more than a third of the funds to acquire Renault's shares.

At present, many specific terms of the merger between the two parties are still to be finalized. Nissan and Honda plan to determine the share transfer ratio in June, which will refer to the average share price before the signing of the memorandum of understanding. After the merger plan was announced at the end of last year, Honda's stock price suffered a heavy blow due to market concerns that Nissan would drag down Honda's development.